Smt. Laxmi Devi Vs. Sethani Mukand
Kanwar & Two Others  INSC 225 (9 October 1964)
09/10/1964 GAJENDRAGADKAR, P.B. (CJ)
GAJENDRAGADKAR, P.B. (CJ) WANCHOO, K.N.
CITATION: 1965 AIR 834 1965 SCR (1) 726
R 1971 SC1201 (4) F 1976 SC 737 (14)
Transfer of Property Act (4 of 1882), ss.
2(d), 5 and 100Auction sale in execution of decree-If transfer of propertyCharge-If
enforceable against auction purchaser.
Code of Civil Procedure (Act 5 of 1908), 0.
21, r. 90Substantial injury-What is-Application to set aside auction
sale-Averment regarding substantial injury-Necessity for.
The 2nd respondent obtained a money decree
against the 3rd respondent and in execution of that decree brought the suit
property to sale and the appellant purchased it. Prior to the sale, however,
there was a decree, in favour of the 1st respondent, for arrears of
maintenance, and a charge in favour of the 1st respondent was declared over the
properties of the 3rd respondent, including the suit property.
The 1st respondent therefore filed an
application under 0.
21, r. 90 of the Code of Civil Procedure,
1908, to set aside the sale. The Executing Court dismissed the application
holding that she had failed to show any substantial injury.
The order was set aside by the High Court on
appeal. In the appeal to the Supreme Court, it was contended that the
application should be dismissed as : (i) there was no allegation of substantial
injury in the application, and (ii) in fact the 1st respondent had not suffered
any substantial injury.
HELD : The appeal should be allowed.
While s. 5 of the Transfer of Property Act,
1882 defines "transfer of property" only as a transfer effected by
act of parties inter vivos, s. 2(d) provides that save as provided by Chapter
IV of the Act, the provisions of the Act are not deemed to affect transfers in
execution of decrees. Since the positive provision in s. 2(d) prevails over s.
5, Chapter IV and s. 100 in that Chapter would apply to auction sales in
execution of decrees. Section 100 provides that a charge shall not be enforced
against any property in the hands of a person to whom the property has been
transferred for consideration and without notice of the charge. The result
would be that as a consequence of the material irregularity in not referring to
the charge in favour of the 1st respondent in the proclamation of sale under 0.
66 of the Civil Procedure Code, 1908, the 1st
respondent would not be able to enforce the charge against the suit property
purchased by the appellant in auction sale. When injury is thus implicit in the
irregularity it would be too technical to dismiss the application on the ground
that there was no express averment of substantial injury as required by the
proviso to 0. 21 r. 90(1) of the Code. But the application should however be
dismissed, because the injury suffered by the 1st respondent was not in fact a
substantial injury. There were other propertiesto the charge and they would be
available to meet all her legitimateby way of maintenance. [731 C-D, G; 732 B;
733 E-G; 734 E-F; 735E-F, H] Nawal Kishore v.
The Municipal Board, Agra, I.L.R.  AU. 453 (F.B.), R. L. Nanadkeolvar v.
Sultan Jahan, I.L.R.
31 Pat. 722 and 727 Munna Singh Allah Singh
v. Wasti Ram Saraf and others, A.I.R. 1960 Punj. 296, approved.
Arumilli Surayya v. Pinisetti
Venkataramanamma and others, A.I.R. 1940 Mad. 701 and Creet v. Ganga Ram Gool
 1 Cal. 203, overruled.
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 247 of 1962.
Appeal from the judgment and order dated July
29, 1960, of the Rajasthan High Court in D. B. Civil Misc. Appeal No. 54 of
Bishan Narain, Amar Chand Inani and B. P.
Maheshwari, for the appellant.
B. D. Sharma, for respondent No. 1.
The Judgment of the Court was delivered by
Gajendragadkar C.J. This appeal arises out of an application made by respondent
No. 1, Smt. Mukand Kanwar, challenging the validity of an auction sale held on
the 14th May, 1954 in execution of a money decree passed in favour of Ratan Lal
Dani, Secretary, Hindu Charitable Aushdhalaya, Ajmer, respondent No. 2, and
against Umrao Mal, respondent No. 3.
The property sold at the auction sale is
"old Daikhana" at Ajmer. On the 24th June, 1950, Umrao Mal who was
the owner of the property, mortgaged it to the appellant Laxmi Devi.
Later, respondent No. 2 obtained a money
decree against respondent No. 3 for a large amount, and in execution of this money
decree he brought the property in question to sale. Auction sale was
accordingly held on the 14th May, 1954, and the appellant purchased the
property subject to the preexisting mortgage in her favour. The amount due
under the mortgage was Rs. 33,264 and as auction-purchaser, the appellant paid
Rs. 2,800 whereby she purchased the equity of redemption vesting in respondent
No. 3, the judgment-debtor. It is the validity of this sale that is challenged
in the present proceedings.
Long before the mortgage was executed,
respondent No. 3 had executed in favour of his mother, respondent No. 1, a document
whereby her maintenance was guaranteed. This document had created charge over
certain properties belonging to respondent No. 3. On the strength of this document,
respondent No. 1 sued respondent No. 3 (civil suit No. 233 of 1952). In this
suit, she claimed arrears of maintenance and asked for a declaration that the
properties specified in the plaint, which were the 728 same as the properties
covered by the previous agreement between the parties, were subject to a charge
for her maintenance. The trial Court gave her a decree for arrears of
maintenance, but declined to make the declaration as to charge claimed by her.
This decree, was pronounced on the 31st July, 1952. Against this decree,
respondent No. 1 preferred An appeal (No. 80 of 1952) to the Judicial
Commissioner, Ajmer. Her appeal succeeded and the charge over the properties
was declared in her favour. This decision was pronounced on the 10th February,
After the auction sale was held on the 14th
May, 1954, it was challenged by two separate applications, one was made by
respondent No. 3, the judgment-debtor, on the 28th June, 1954, and the other by
respondent No. 1 on the same date.
Both these applications were made under 0. 21
r. 90 of the Code of Civil Procedure. The application made by respondent No. 3
was dismissed on the 30th April, 1955, while the application made by respondent
No. 1 went to a trial. The Executing Court which heard this application tried
three issues. The first issue was whether the sale had been vitiated by any
irregularity as required by 0. 21 r. 90.
The second was whether respondent No. 1 was a
person whose interests had been affected by the impugned sale; and the third was
whether the irregularity alleged by respondent No. 1 had caused substantial
loss to her. All these issues were decided in favour of respondent No. 1. In
the result, the impugned sale was set aside on the 4th May, 1955.
The appellant challenged the correctness of
this decision before the Judicial Commissioner, Ajmer. It was urged on behalf
of the appellant that the application made by respondent No. 1 did not satisfy
the requirements of 0. 21 r. 90 of the Code inasmuch as appropriate allegations
had not been made in the application showing that substantial injury had been
suffered by respondent No. 1 by reason of the irregularities which, according
to her, had vitiated the said sale. This plea was rejected by -the Judicial
Commissioner. It was then urged that respondent No. 1 was not competent to make
the said application. The Judicial Commissioner did not accept even this plea.
The last argument which was pressed before the Judicial Commissioner was that
the finding recorded by the Executing Court that respondent No. 1 had suffered
substantial injury was not justified, and that in fact, the appellant had no
opportunity to lead her evidence on that issue, because all the three issues on
which the Executing Court had made its findings had been framed by it at a very
late stage of the proceedings.
729 This plea was upheld by the Judicial
Commissioner, and so, he set aside the finding of the Executing Court on that
issue and sent the case back for disposal in accordance with law, with a
direction that the issue as to substantial injury should be tried afresh. This
order was pronounced on the 26th August, 1955.
After remand, the Executing Court considered
the issue as to substantial injury and held that respondent No. 1 had failed to
show any substantial injury. As a result of this finding, it ordered that her
application under 0. 21 r. 90 should be dismissed, and the sale should be
confirmed. This order was pronounced on the 27th April, 1957.
Aggrieved by this order, respondent No. 1
preferred an appeal, and since the High, Court of Judicature at Rajasthan had
then come into existence, her appeal was heard by the said High Court. The High
Court has held that the Executing Court was in error in coming to the
conclusion that respondent No. 1 had not proved substantial injury. The
contentions raised by the appellant in support of the ultimate decision reached
by the Executing Court were rejected by the High Court, and as a result, the
application made by respondent No. 1 was allowed and the impugned sale set aside.
This appellate order was pronounced on the 29th July, 1960. It is against this
order that the appellant has come to this Court with a certificate granted by
the said High Court. Thus, it willbe noticed that the sale which took place on
the 14h May, 1954 still remains to be confirmed.
On behalf of the appellant, Mr. Bhasin Narain
has conceded that as a person holding a charge over the property sold at the
auction sale, respondent No. 1 can rely on s. 100 of the Transfer of Property
Act and as such was competent to make the application under 0. 21 r. 90. Order
21, r. 90(1) provides, inter alia. that where any immovable property has been
sold in execution of a decree, any person whose interests are affected by the
sale, may apply to the Court to set aside the sale on the ground of a material
irregularity or fraud in publishing or conducting it. There is a proviso to
this rule which is relevant for our purpose.
This proviso lays down that no sale shall be
set aside on the ground of irregularity or fraud unless upon the facts proved,
the Court is satisfied that the applicant has sustained substantial injury by
reason of such irregularity or fraud. While conceding that respondent No. 1 was
entitled to make an application as a person whose interests were affected by
the impugned sale, Mr. Bishan Narain argues that if the application made by her
is properly 730 construed, it would appear that the material allegations of
fact which must be made by the applicant invoking 0. 21 r.
90(1), have not been made; and so, the said
application should be. dismissed on that ground alone. On the merits, he
contends that there is no evidence on which a finding can be made in favour of
respondent No. 1 that she has suffered substantial injury by reason of any
irregularity committed in the conduct of the sale.
The application made by respondent No. 1 is
no doubt somewhat defective, because it does not, in terms, allege that as a
result of the irregularity alleged in the application, respondent No. 1 has
suffered substantial injury. The application avers that before the impugned
auction sale was held, a proclamation had been issued, but the said
proclamation did not refer to the charge in favour of respondent No. 1 which
had already been recognised by decree in a suit between respondent No. 1 and
3 and that naturally attracts the provisions
of 0. 21 r. 66 of the Code. Order 21 r. 66(2) (e) requires that the
proclamation shall be drawn up and shall specify as fairly and accurately as
possible any in cumbrance to which the property sought to be sold is liable.
The failure to mention the charge in favour of respondent No. 1 would,
therefore, constitute an irregularity within the meaning of 0. 21 r. 90(1).
This position is also not in dispute.
The contention, however, is that the
application made by respondent No. 1 does not show what injury she has suffered
as a result of the said irregularity, and that, it is argued, constitutes a
serious infirmity in the application which would entail its dismissal. On the
other hand, Mr.
Sharma for respondent No. 1 has relied on the
fact that the auction sale would virtually wipe out or extinguish the rights
which have accrued to respondent No. 1 by virtue of the charge declared by a
decree in her favour, and he has suggested that the legal consequence flowing
from the fact that the auction sale has been held without notice of the charge
in favour of respondent No. 1 itself constitutes substantial injury to the
interests of respondent No. 1.
This argument is based on the latter part of
S. 100 of the Transfer of Property Act. We will presently refer, to this
provision. At this stage, it is enough to state that if Mr. Sharma is right in
contending that an auction sale of immovable property which has followed the
proclamation issued under 0. 21 r. 66 in which no reference to a charge is
made, materially affects the rights of the charge-holder, some injury would
automatically flow from the irregularity alleged in the application filed by
respondent No. 1, and so, it would not be 731 appropriate to hold that the said
application should be dismissed on the ground that no substantial injury has
been alleged as required by the proviso to 0. 21 r. 90(1).
It is true that before an application made
under 0. 21 r..90 can succeed, the applicant has to show that the impugned sale
was, vitiated by a material irregularity or fraud in publishing or conducting
it; and as required by the proviso, it is also necessary that he should show
that in consequence of the said irregularity or fraud he had sustained
substantial injury. Therefore, Mr. Bishan Narain is right when he contends that
the application made by respondent No. 1 ought to contain an allegation in
regard to the material irregularity as well as an allegation-as to substantial
injury. But, in our opinion, in a case like the present, where substantial
injury is alleged to be implicit in the material irregularity set out in the
application, it would be, too technical to hold that the application should be
dismissed on the preliminary ground that no specific or express averment has
been made as to substantial injury suffered by respondent No. 1.
Now, in dealing with the question as to
whether respondent No. 1 can be said to have alleged that she has suffered
substantial injury by reason of the fact that she has alleged a material
irregularity which, in law, necessarily leads to substantial injury, it is
necessary to consider the question as to whether the latter part of s. 100 of
the Transfer of Property Act applies to the present case.
Section 100 deals with charges, and it
provides when a person can be said to have a charge on the property; and adds
that all the provisions hereinbefore contained which apply to a simple mortgage
shall, so far as may be, apply to such charge. It is common ground that
respondent No. 1 can claim to be charge-holder as defined by s. 100.
That takes us to the latter part of s. 100.
This part provides, inter alia, that save as otherwise expressly provided by
any law for the time being in force, no charge shall be enforced against any
property in the hands of a person to whom such property has been transferred
for consideration and without notice of the charge. Mr. Sharma contends that
the auction-purchaser holds the property as a result of the auction sale, and
in that sense, the property must be held to have been transferred to him. He
adds that the charge was not notified in the proclamation, and so, the auction
purchaser has no notice of the charge, and the sale is undoubtedly supported by
consideration. In other words, the case of the appellant directly falls under this
part of s. 100, and so, respondent 732 No. 1 would not be able to enforce her
charge against the property purchased by the appellant at the auction sale.
That, according to him, constitutes
This argument raises the question as to
whether the relevant provision of s. 100 takes in the cases of auction purchase
at all. For answering this question, it is necessary to refer to two other
provisions of the Transfer of Property Act. Section 2(d) provides that nothing
herein contained shall be deemed to affect, save as provided by S. 57 and
Chapter IV of this Act, any transfer by operation of law or by, or in execution
of, a decree or order of a Court of competent jurisdiction. The effect of this
provision is that the provisions of the Transfer of Property Act will not apply
to any transfer by operation of law or by, or in execution of, a decree or
order of a Court of competent jurisdiction. This provision is clear and
emphatic. It says that nothing in the Transfer of Property Act will apply to
the transfers just indicated; and that would naturally take in the whole of S.
100. But there is an exception made to this provision by S. 2(d) itself by the
saving clause, and this exception covers cases provided by s. 57 and Chapter
IV. Chapter IV deals with mortgages of immovable property and charges.. and
includes sections 58 to 104.
Section 100, therefore, falls within Chapter
IV; and, the result of the saving clause is that s. 100 would apply to
transfers by operation of law. There is, therefore, no doubt that if the
question as to the applicability of the latter part of S. 100 to cases of
auction sales had to be determined only by reference to S. 2(d), the answer
would clearly be in favour of such applicability.
It is true that when S. 2(d) was originally
enacted, the latter part of S. 100 was not included in the Transfer of Property
Act; this was added in 1929 by S. 50 of Act 20 of 1929. That, however, would
make no difference to the interpretation of the relevant clause in s. 2(d). The
fact that the saving clause included in s. 2(d) as it was originally enacted,
could not have taken in the latter part of s. 100, makes no difference to its
construction, because as soon as the latter provision was added to S. 100, it
became a part of the provisions contained in Chapter IV and automatically fell
within the terms of the saving clause.
If the legislature had intended that the
provision added to s. 100 in 1929 should not fall within the saving clause, an
appropriate provision would have been made by amending S.
2(d) in that behalf. Therefore, s. 2(d) by
itself clearly supports Mr. Sharma's contention that the appellant who is an
auction-purchaser would be able to claim 733 immunity against the enforcement
of the charge in favour of respondent No. 1 by virtue of the provisions
contained in the latter part of s. 100.
This position, however, has become somewhat
complicated by reason of the provisions contained in s. 5 of the Transfer of
Property Act. Section 5 provides, inter aria, that in the following sections
"transfer of property" means an act by which a living person conveys
property, in present or in future, to one or more other living persons. In
other words, in terms, the definition of the expression "transfer of
property" as used in all the sections of the Transfer of Property Act is
intended to take in transfers effected by acts of parties inter vivos, and an
auction-sale clearly is not such an act. Section 5 would, therefore, appear to
exclude auction sales from the purview of s. 100 altogether.
This result would appear to be consistent
with the provision in the preamble of the Act which says that the Transfer of Property
Act was enacted because it was thought expedient to define and amend certain
parts of the law relating to the transfer of property by act of parties. That
is the position which emerges from the reading of s. 5 coupled with the
preamble; and that naturally raises the question as to how to reconcile these
two inconsistent positions.
In our opinion, the positive provision
contained in s. 2(d) must prevail over the definition of "transfer of
property" prescribed by s. 5. No doubt, the purpose of the definition is
to indicate the class of transfers to which the provisions of the Transfer of
Property Act are intended to be applied; but a definition of this kind cannot
over-ride the clear and positive direction contained in the specific words used
by s. 2 (d). As we have already seen, the result of the saving clause enacted
by s. 2(d) is to emphasise the fact that the provisions of s. 57 and those
contained in Chapter IV must apply to transfer by operation of law. Such a
positive provision cannot be made to yield to what may appear to be the effect
of the, definition prescribed by s.
5, and so, we are inclined to hold that
notwithstanding the definition prescribed by s. 5, the latter part of s. 100
must be deemed to include auction sales.
This question has been considered by our High
Courts on several occasions, and, on the whole, the majority view appears to be
in favour of the conclusion which we have just indicated. In Nawal Kishore v.
The Municipal Board, Agra, (1), this question was referred to a Full Bench of
the Allahabad High Court, because there appeared to be a conflict between two
previous decisions of (1)I.L.R.  All. 453.
734 Division Benches of the said High Court
on this point.
These two decisions were Rai Indra Narain v.
Muhammed Ismail(1), and Municipal Board, Kanpore v. Roop Chand Jain(2). In the
first decision, the Allahabad High Court had taken the view that auction sales
do not fall within the purview of the latter part of s. 100, while in the
latter case, a contrary view had been accepted. The Full Bench preferred that
latter view to the former. Since this Full Bench decision was pronounced in the
Allahabad High Court, auction-purchasers have been consistently held to fall
under the latter part of S. 100. It has been held by the Full Bench that when
the relevant clause in the latter part of S. 100 speaks of any property in the
hands of person to whom such property has been transferred, the concept of
transfer is wide enough to include transfers effected by acts of parties as
well as transfers effected by operation of law.
The same view has been accepted by the Patna
High Court in R. L. Nanadkeolvar v. Sultan Jehan(3), and by the Punjab High
Court in Manna Singh Al1ah Singh v. Wasti Ram Saraf and Others(1). The decision
of the Madras High Court in Arumilli Surayya v. Pinisetti Venkataramanamma and
Ors.(5) and the decision of the Calcutta High Court in Creet v.
Ganga Ram Gool Raj,(1) which appear to
support the contrary view do not, in our opinion, correctly represent the true
legal position in this matter. Therefore, we must deal with the present appeal
on the basis that as a result of the failure of the proclamation to refer to
the charge in favour of respondent No. 1, she would not be able to enforce her
charge against the property purchased by the appellant by auction sale; and
that means that the impugned sale has been conducted in a materially irregular
manner and as a consequence of the said irregularity, some injury has resulted
to respondent No. 1.
That raises the question as to whether the
said injury can be said to amount to substantial injury within the meaning of
proviso to 0. 21 r. 90(1); and this inevitably would be a question of fact. The
High Court appears to have held that as soon as it is shown that the charge
would become unenforceable against the appellant auction-purchaser by virtue of
the provisions of S. 100, it follows as a matter of law that respondent No. 1
has suffered substantial injury, and so, the impugned sale must be set aside. We
are not prepared to accept this view. We do not think it can be reason(1)
I.L.R.  All. 885.
(2) I.L.R.  All. 669.
(3) I.L.R. (1952) 31 Pat. 722.
(4) A.I.R. 1960. Punj. 296.
(5) A.I.R. .1940 Mad. 701.
(6) I.L.R.  1 Cal. 203.
735 ably assumed as a matter of law that in
every case where a charge has become unenforceable against an auction-purchaser
by reason of the fact that it was not shown in the proclamation preceding the
auction sale, it follows that the charge-holder has suffered substantial
injury. Whether or not the injury suffered by the charge-holder is substantial,
must depend upon several relevant facts. How many properties have been sold at
the auction sale; how many out of them were the subject-matter of the charge;
what is the extent of the claim which the charge-holder can legitimately expect
to enforce against the properties charged, these and other relevant matters
must be considered before deciding whether or not the injury suffered by the
charge-holder is substantial. It is from this point of view that the material
facts in the present case must now be considered.
Properties which are the subject-matter of
the charge are five in number. Out of these properties, it is property No. 3
alone which has been sold at auction sale. It appears that properties Nos. 1
and 2 have already ceased to be available to the charge holder, and so, the
consideration of the question as to whether the injury suffered by respondent
No. 1 is substantial, must depend upon the relative values of properties Nos. 4
and 6. This question has been considered by the Executing Court when the matter
was sent back to that Court by the Judicial Commissioner and the Executing
Court has made a definite finding that the injury suffered by respondent No. 1
cannot be said to be substantial. According to it, properties Nos. 4 and 6
which would be available to respondent No. 1 would be enough to meet all her
legitimate claims against the judgment-debtor, respondent No. 3. The value of
Property No. 4 is Rs. 1,18,967 whereas the value of property No. 6 is Rs. 1,25,464.
The Executing Court has taken into account the amount which respondent No. 1 is
entitled to claim by way of maintenance from respondent No. 3, has also borne
in mind the fact that respondent No. 1 is an old lady past 70 years of age and
has come to the conclusion that, on the whole, the sale of property No. 3 to
the auction-purchaser cannot be said to have caused substantial injury to her.
In our opinion, it is difficult to differ from this conclusion; and so, it
follows that though respondent No. 1 has been able, to show that her charge
could not be enforced against the appellant, it is not shown that this
circumstance has caused substantial injury to her. The result, therefore, is
that the requirement of the proviso to 0. 21 r. 90 of the Code is not satisfied
in the present case.
736 We ought to add that pending the appeal
before this Court, respondent No. 3, Umrao Mal has died leaving behind him his
mother respondent No. 1 and his widow, and the estate of Umrao Mal has devolved
on these two widows; and so, respondent No. 1 has now become the owner of part
of the properties against which she would otherwise have been entitled to
proceed in execution of tier maintenance decree.
The result is, the appeal is allowed, the
order passed by the High Court is set aside and the application made by
respondent No. 1 under 0. 21 r. 90 is dismissed. There would be no order as to